During his fourth state-of-the-state address Jan. 16, Alaska Gov. Sean Parnell (R) detailed progress made on two ongoing efforts to build a pipeline that would transport Alaska North Slope gas to market, emphasizing the need to "choose a future that gets our gas to Alaskans first, and then to markets beyond." Though populist on its surface, this approach has proven effective in getting momentum behind not just building an Alaskan gas pipeline but reinvigorating energy development in the state overall, even while production in the Lower 48 has soared.
Addressing Alaska Gasline Development Corp.'s (AGDC) project first, Parnell noted that as it advanced through the regulatory process it also moved toward a larger-diameter pipe, providing "a simple answer to a complex question about how to lower the cost of getting Alaska's gas to Alaskans: Get more gas in the pipe." The benefits of such an approach are clear: A larger diameter will allow increased extraction rates on the part of producers, enough gas being shipped to both meet Alaska's needs and still have material for export, and in so doing create the economies of scale necessary to maximize project efficiency and reduce costs.
Parnell also reported that the Alaska Pipeline Project, backed by BP PLC, ConocoPhillips, ExxonMobil Corp., and TransCanada Alaska, had met the benchmarks he had set forth in 2012's address. He cited the combination of progress on this front and a settlement between the state and Point Thompson leaseholders (OGJ Online, Apr. 9, 2012) in declaring that "for the first time, development of Alaska's eastern North Slope is under way. Hydrocarbons will come from Point Thomson by 2016."
With an eye toward exporting Alaskan gas as LNG to Asia, particularly South Korea and Japan, Parnell laid out a roadmap for continued pipeline development. Among the key points was boosting AGDC's ability to build an all-Alaska gas line, or to participate with others in building one. Parnell noted legislation already in the works to accelerate both AGDC and a merger of the two plans.
Toward this end he also called on the Alaska Pipeline Project to make a firm commitment to and present a detailed concept for an all-Alaska project by Feb. 15. Parnell said the concept must include pipe diameter, daily volume of gas to be delivered, gas treatment plant location, the number of compressor stations required, size and scope of the liquefaction plant and LNG storage tanks, and the number of off-take points to supply Alaska. He called on Alaska Pipeline Project to finalize a pre-FEED agreement this spring so that field work could begin this summer.
Immediate needs
Parnell cast progress on an intrastate gas pipeline as a component of increasing the supply of low-cost energy to Alaskans and boosting the state's revenues, effectively making a virtue of necessity. Two other components recently addressed include overhauling the state's tax structure on oil and gas production and producing and distributing LNG in interior Alaska. Parnell on Jan. 15 submitted tax legislation designed to increase oil production and attract new investment.
One day later he asked legislative authority for the Alaska Industrial Development and Export Authority (AIDEA) to advance its Interior Energy Plan, allowing AIDEA to provide as much as $275 million for a natural gas liquefaction plant and additional financing for an LNG distribution system in the Fairbanks North Star borough. A North Slope LNG plant would produce gas to be delivered via truck to Fairbanks and beyond, including south-central Alaska.
The need for this sort of solution is pressing, even while work continues on a larger gas pipeline. Utilities in south-central Alaska late last year asked for proposals to import LNG or compressed natural gas to augment local supplies, with the possibility of importing diesel as a stop-gap measure also broached.
